After issuing a rare grant of a mandamus petition directing a district court to stay proceedings until ruling on a pending motion to transfer, the US Court of Appeals for the Federal Circuit denied a subsequent mandamus petition to compel transfer after that district court denied the transfer. In re SK hynix Inc., Case No. 21-114 (Fed. Cir. Feb. 25, 2021) (Taranto, J.) (non-precedential). The Federal Circuit found that the doctrine of forum non conveniens and the first-to-file rule did not establish a basis for transfer because the action could not have initially been brought in the transferee forum and the patentee’s prior filings in that forum did not give consent for subsequently filed actions.
Netlist and SK hynix are competitors in the memory semiconductor space. Netlist sued SK hynix for patent infringement in the US District Court for the Western District of Texas. SK hynix moved to transfer the case to the US District Court for the Central District of California. With no ruling after eight months (while the case continued to move forward), SK hynix sought mandamus from the Federal Circuit to compel the district court to transfer the case. The Federal Circuit declined to transfer the case and instead stayed the district court proceedings until the district court ruled on the transfer motion. The district court then denied the transfer motion, rejecting SK hynix’s arguments that the doctrine of forum non conveniens and the first-to-file rule required transfer to the Central District of California. The district court also advanced the Markman hearing and trial dates. SK hynix again sought mandamus from the Federal Circuit to compel transfer and requested a stay of the district court proceedings because of the advanced Markman and trial dates.
Applying Fifth Circuit law, the Federal Circuit denied the mandamus petition, concluding that SK hynix had not shown that the district court clearly abused its discretion in denying the transfer motion. On the forum non conveniens issue, the Court found no clear abuse in the district court’s determination that SK hynix did not meet the threshold conditions for transfer under 28 USC § 1404(a), namely that the action “might have been brought” in the Central District of California or that, in the alternative, all the parties had consented to that venue for the action. As to the “might have been brought” inquiry, the Court found that the district court properly focused on whether the action might have been brought against SK hynix America, a domestic entity subject to the venue requirements of 28 USC § 1404(b) and headquartered in the Northern District of California, rather than SK hynix, a foreign entity not subject to the same venue requirements. The Court also found that SK hynix did not differentiate between the foreign and domestic SK hynix entities in its transfer motion. This was not an action that might have been brought against SK hynix in the Central District of California because SK hynix America lacked sufficient presence there to confer venue under § 1400(b). Venue was proper in the Northern District of California, where SK hynix America maintained its principal place of business.
The Federal Circuit also found no basis for disturbing the district court’s conclusion that SK hynix failed to establish applicability of the alternative threshold basis for a § 1404(a) transfer, specifically, that all parties had consented to venue over the action in the Central District of California. SK hynix pointed to Netlist’s earlier filings of two pending but inactive patent infringement actions against SK hynix in that district. The lawsuits involved different patents that were in the same family as the patents in the Texas action and whose asserted claims were all ruled unpatentable by the Patent Trial & Appeal Board. The Court found this insufficient to establish an inference of consent and pointed to Netlist’s express objection to venue over this specific action. Netlist’s earlier filings in the Central District of California did not automatically consent to venue there for subsequent actions involving different patents. The Court accordingly found that the district court did not clearly abuse its discretion when it determined that SK hynix did not meet the threshold requirements for transfer under § 1404(a).
The Federal Circuit also found the first-to-file rule (which generally provides that when related cases are pending before two federal courts, the court of the last-filed case may refuse to hear it if there are substantially overlapping issues) inapplicable because § 1404(a)’s threshold conditions for the transferee forum were not met. The Court noted that its conclusion did not foreclose the Texas and California district courts’ ability to utilize stays or other means to try to fulfill the first-to-file rule’s objective of avoiding inconsistent judgments or a waste of party and judicial resources.
Accordingly, the Federal Circuit denied SK hynix’s mandamus petition and request to stay the district court proceedings.
